SAN DIEGO - CV Sciences, Inc. (OTCQB:OTC:CVSI), a notable player in the consumer wellness sector, announced its plans to acquire Extract Labs, Inc., a prominent cannabinoid product manufacturer and distributor. This strategic move is set to bolster CV Sciences' market presence by enhancing its product lineup and manufacturing capabilities.
The definitive agreement details a purchase structure that includes a $400,000 cash payment and the issuance of CV Sciences' common stock valued at $1,000,000, based on a 60-day volume-weighted average price. Additionally, Extract Labs' sellers could receive up to $600,000 in CV Sciences' common stock if certain revenue targets are met over two 12-month periods post-closing.
Joseph Dowling, CEO of CV Sciences, expressed enthusiasm about the acquisition, anticipating increased revenue, customer base expansion, and operational optimization. Dowling also highlighted the potential for significant cost savings by in-sourcing the manufacturing of certain +PlusCBD™ branded products.
Extract Labs, known for its gummies, topicals, and tinctures, operates with a flexible production model that caters to both small and large order quantities. This flexibility is expected to enhance CV Sciences' speed to market for new product development. The acquisition is poised to close in the first quarter of 2025, pending customary conditions.
CV Sciences, with its +PlusCBD™ products, leads the hemp extract market in natural product sales, as reported by industry data provider SPINS. The company's commitment to science-backed products is evident in their investment in clinical research to achieve self-affirmed Generally Recognized as Safe (GRAS) status for their hemp extract supplements.
The acquisition is expected to integrate seamlessly with CV Sciences' existing operations, which include a range of wellness products distributed through various sales channels. The company also maintains a drug development program focused on CBD-based therapeutics.
This report is based on a press release statement from CV Sciences, Inc. Investors are encouraged to consult the Current Report on Form 8-K filed by the company for a comprehensive overview of the transaction's terms.
In other recent news, CV Sciences reported a Q3 2024 revenue of $3.9 million, maintaining its consistency with prior quarters. The company also highlighted the successful introduction of its new cannabinoid-free product line and the integration of its recent acquisitions, Elevated Softgels and Cultured Foods. These developments are expected to contribute to future growth and profitability. CV Sciences also noted an improvement in gross margin to 46%, attributing this to a better product mix and cost savings. The company continues to focus on operational efficiency and market expansion, with the aim of listing on a major stock exchange. Furthermore, the direct-to-consumer segment grew, now representing 42.8% of total revenue. The company is also preparing for a Q1 2025 launch of a new plant-based protein product line. These are the recent developments for the company.
InvestingPro Insights
CV Sciences' strategic acquisition of Extract Labs comes at a crucial time for the company, as reflected in recent financial data and market performance. According to InvestingPro, CV Sciences has a market capitalization of $8.13 million, indicating its current position as a small-cap player in the consumer wellness sector.
The company's revenue for the last twelve months as of Q3 2023 stood at $15.62 million, with a gross profit of $7.23 million and a gross profit margin of 46.3%. These figures suggest that CV Sciences maintains a healthy gross margin despite recent challenges.
An InvestingPro Tip highlights that analysts anticipate sales growth in the current year, which aligns with the company's strategic move to acquire Extract Labs. This acquisition could potentially address the recent revenue decline, as InvestingPro data shows a revenue growth of -2.8% over the last twelve months.
Another relevant InvestingPro Tip notes that CV Sciences holds more cash than debt on its balance sheet. This financial position likely facilitated the cash component of the Extract Labs acquisition and may provide flexibility for future growth initiatives.
It's worth noting that CV Sciences' stock has faced headwinds, with InvestingPro data showing a -17.01% price return over the past month and a -28.12% return over the last six months. The acquisition could be seen as a strategic move to reverse this trend and create shareholder value.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips and metrics that could provide deeper insights into CV Sciences' financial health and market position. There are 9 additional InvestingPro Tips available for CV Sciences, which could be valuable for understanding the company's full potential following this acquisition.
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